Brokerage firms that experience serious financial difficulties and must
be shut down undergo what are called “liquidation” proceedings. The
good news is that such closures do not happen very often. Thanks to the
combined efforts of securities regulators (the U.S. Securities and
Exchange Commission and state securities regulators), and securities
industry self-regulatory organizations (the NASD and stock exchanges),
brokerage firm failures are a rare event in the United States. Even when
a brokerage firm encounters financial difficulty, it usually has all of the
assets owed to its customers, and can efficiently transfer those assets to
another brokerage without a liquidation proceeding.
However, a small handful of brokerage firms do encounter more
severe financial difficulties, including customer assets that may be
missing due to theft. These are the instances where the Securities
Investor Protection Corporation (SIPC) steps in to recover or replace
customer cash and securities, within certain limits set by law. SIPC
was created in 1970 by Congress under the Securities Investor
Protection Act (SIPA) to protect the interests of investors and to help
bolster confidence in the integrity of the American securities markets.
Nearly all brokerage firms registered with the U.S. Securities and
Exchange Commission are required by law to be members of SIPC.
You can find SIPC on the Web at http://www.sipc.org.
THE INVESTOR’S GUIDE TO
BROKERAGE FIRM LIQUIDATIONS:
WHAT YOU NEED TO KNOW… AND DO
Securities Investor Protection Corporation
805 15th Street, N.W. Suite 800
Washington, D.C. 20005-2215
Tel: 202.371.8300 l Fax: 202.371.6728
FREQUENTLY ASKED QUESTIONS
I didn’t get a claim form.
What should I do?
Go to SIPC’s Web site at http://www.sipc.org.
Shortly after a liquidation proceeding starts,
SIPC will post a copy of the claim form on its
Web site. While you cannot file a claim
electronically, you can print out the claim
form on the Web site and send it in. You also
can consult the SIPC